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Bank and NBFC - Mehal
Bank and NBFC - Mehal
Bank and NBFC - Mehal
Submitted By:
Mehal Dhongade
PGDM (e-business) 2014-16
Roll No. PG14061
DECLARATION
I, Mehal Dhongade, student of Mumbai Educational Trust (MET), hereby declare that this
project report titled Fundamental and Technical analysis of Banking and NBFC sector at
Aditya Birla Financial Services Group, carried out under the guidance of Mr. Nikesh Ruparel
at Aditya Birla Financial Services Group, is the record of authentic work carried out by me
during the period from 4th May 2015 to 4th of July 2015.
Sign:
Mehal Dhongade
PGD 14061
MET ICS, Mumbai
CERTIFICATE
This is to certify that Mr. Mehal Dhongade has successfully completed the project work titled
Fundamental and Technical analysis of Banking and NBFC sector in partial fulfilment of
requirement for the completion of Post-Graduation Course as prescribed by the College of
Management.
This project report is the record of authentic work carried out by him during the period from
4thMay, 2015 to 4th July, 2015. He has worked under my guidance.
Sign:
INDEX
Sr no.
Particulars
Introduction to Banking
Hedging
10
Candlesticks
11
Introduction to NBFC
12
NBFC vs BANKS
13
Prospects of NBFC
14
15
NBFC vs Benchmark
16
17
18
19
Conclusion
20
Webliography
Page no
Banking Sector
Introduction
According to the Reserve Bank of India (RBI), the banking sector in India is sound,
adequately capitalised and well-regulated. Indian financial and economic conditions are much
better than in many other countries of the world. Credit, market and liquidity risk studies
show that Indian banks are generally resilient and have withstood the global downturn well.
With a sense of optimism slowly creeping in, the banking industry expects that 2015 will
bring better growth prospects. This optimism stems from factors such as the Government
working hard to revitalise the industrial growth in the country and the RBI initiating a
number of measures that would go a long way in helping the banks to restructure. The recent
announcements of RBI, it is felt, are a clear pointer to the future of the restructured domestic
banking industry.
Deposits have grown at a CAGR of 19.7 per cent during FY0714 to an estimated USD 1.31
trillion
Deposit growth has been mainly driven by strong growth in savings amid rising disposable
income levels
Access to the banking system has also improved over the years due to persistent government
efforts to promote banking-technology, and promote expansion in unbanked and nonmetropolitan regions
banks was well above the norms around 12.8%. Return on net worth for PSBs dropped to
single digit in FY14.
Prospects
The Indian economy is now on the threshold of a major transformation, with expectations of
policy initiatives being implemented. Positive business sentiments, improved consumer
confidence and more controlled inflation should help boost the economic growth. Higher
spending on infrastructure, speedy implementation of projects and continuation of reforms
will provide further impetus to growth. All this translates into a strong growth for the banking
sector too, as rapidly growing business turn to banks for their credit needs, thus helping them
grow.
Also, with the advancements in technology, mobile and internet banking services have come
to the fore. Banks in India are focusing more and more to provide better services to their
clients and have also started upgrading their technology infrastructure, which can help
improve customer experience as well as give banks a competitive edge.
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contactless credit and debit cards in the market soon. The cards, which use near field communication
(NFC) mechanism, will allow customers to transact without having to insert or swipe.
Allocation of Fund
Banks
Market price (11th June) No. of Shares Total value
1 Karur Vysya
453.45
39695
17999697.75
812
17734
14400008
3 ICICI Bank
287.6
41724
11999822.4
101.5
59113
5999969.5
5 IndusInd Bank
807.2
11149
8999472.8
2 Yes Bank
59398970.45
Karur Vysya
Yes Bank
15.00%
ICICI Bank
10.00%
21.77%
18.00%
5.00%
IndusInd Bank
10.00%
5.24%
5.00%
0.00%
KARUR
VYSYA
YES BANK
INDUSIND
BANK
From 11th june I have started monitoring fund till 9th july, in this time period there was
various ups and downs in the market and the price of all the stock were moving accordingly.
The position of the fund on 9th july was as follows
BUY
Karur Vysya
Yes Bank
ICICI Bank
City Union Bank
IndusInd Bank
Total
14,86,577.75
14,00,000.00
12,00,000.00
9,56,584.20
9,13,755.60
10,00,000.00
8,00,000.00
6,00,000.00
4,00,000.00
(2,04,717.30)
2,00,000.00
(32,512.15)
0.00
(2,00,000.00)
(4,00,000.00)
KARUR
VYSYA
YES BANK
ICICI BANK
CITY UNION
BANK
INDUSIND
BANK
Gain in percentages
12.00%
10.00%
8.00%
Karur Vysya
6.00%
4.00%
10.63%
8.26%
2.00%
7.61%
-1.50%
-2.00%
KARUR
VYSYA
YES BANK
ICICI Bank
City Union Bank
-0.54%
0.00%
Yes Bank
INDUSIND
BANK
IndusInd Bank
-4.00%
BankNifty
As you can see that the returns of Banking sector fund is more than that of the Benchmark
BankNifty. The returns given by the Banking sector is 7.25% where as the return given by the
BankNifty is 4.95%.
Hedging
What is Hedging?
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a
hedge consists of taking an offsetting position in a related security, such as a futures contract.
An example of a hedge would be if you owned a stock, then sold a futures contract stating that
you will sell your stock at a set price, therefore avoiding market fluctuations.
Investors use this strategy when they are unsure of what the market will do. A perfect hedge
reduces your risk to nothing (except for the cost of the hedge).
Hedging in Fund
In the Banking fund I was not sure about the Yes Bank so I decided to hedge it. I hedged 10%
of the Yes Bank stock which was in the equity market so I sold (i.e. I went short) 10% of it in
the Future market. Now in the Future market you need not to pay all the money, the margin
amount has to be paid. This margin differs from stock to stock, for Yes Bank indicative span
margin is 8% and gross exposure margin is 5%, so the total margin is 13%. Only 13% of
amount of the total amount has to be paid. In the Futures market you cant take single share
you have to take it in lot so the lot for Yes Bank is 250 and I have shorted 7 such lots.
After hedging total portfolio of the banks is as follows
Banks
Market price
1
2
3
4
Karur Vysya
Yes Bank
ICICI Bank
City Union Bank
5 IndusInd Bank
Hedging
Cash in hand
453.45
812
287.6
101.5
807.2
No. of Shares
Total value
39695
17999697.75
17734
14400008
41724
11999822.4
59113
5999969.5
11149
8999472.8
59398970.45
184422.88
416606.67
60000000
BankNifty
As you can clearly see that without hedging the percentage return is 7.25% and with hedging
is 7.34% so it clearly shows that when market goes in the opposite direction of what you need
and if you have used hedging then it will give more returns.
Technical Analysis
Technical Analysis is the study of market action, primarily through the use of charts, for the
purpose of future price trends. The term market action includes the three principal sources
of information available to the technician price, volume and open interest.
Technical analysis depends on DOW THEORY and its principles are as follows
1. The Averages Discount Everything
2. The Market Has Three Trends
3. Major Trends Have Three Phases
4. The Averages Must Confirm Each Other
5. Volume Must Confirm the Trend
6. A Trend Is Assumed to Be Continuous Until Definite Signals of Its Reversal
Technical Analysis is based on the following 3 principles:
Price Discounts Everything
According to technical analysts, price reflects everything that can affect the market. Factors,
affecting the market, are economic, political, psychological and fundamental. Technical
analysis is mainly concerned with the price movements going up or going down, and it does
not take into consideration the factors that affect the price changes.
Prices Move in Trends
In technical analysis it is accepted to say that price movements follow the trend. That is to say
after the trend has been established it is more likely that the future price movement will be in
the same direction as the trend.
History Repeats Itself
History tends to repeat itself mostly in terms of price movements. Technical analysis uses
chart patterns for analyzing the historical data of price movements for forecasting the future
movements. The repetition of the price movements is closely connected to market
psychology, and the market participants are expected to react the same way to the similar
events which are likely to occur in future.
Candlesticks
The Japanese began using technical analysis to trade rice in the 17th century. While this early
version of technical analysis was different from the US version initiated by Charles
Dow around 1900, many of the guiding principles were very similar:
The what (price action) is more important than the why (news, earnings, and so on).
Buyers and sellers move markets based on expectations and emotions (fear and greed).
Markets fluctuate.
Formation
In order to create a candlestick chart, you must have a data set that contains open, high, low
and close values for each time period you want to display. The hollow or filled portion of the
candlestick is called the body (also referred to as the real body). The long thin lines
above and below the body represent the high/low range and are called shadows (also
referred to as wicks and tails). The high is marked by the top of the upper shadow and
the low by the bottom of the lower shadow. If the stock closes higher than its opening price, a
hollow candlestick is drawn with the bottom of the body representing the opening price and
the top of the body representing the closing price. If the stock closes lower than its opening
price, a filled candlestick is drawn with the top of the body representing the opening price
and the bottom of the body representing the closing price.
Doji
Doji are important candlesticks that provide information on their own and as components of
in a number of important patterns. Doji form when a security's open and close are virtually
equal. The length of the upper and lower shadows can vary and the resulting candlestick
looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or
bearish bias is based on preceding price action and future confirmation. The word Doji
refers to both the singular and plural form.
Star Position
A candlestick that gaps away from the previous candlestick is said to be in star position. The
first candlestick usually has a large real body, but not always, and the second candlestick in
star position has a small real body. Depending on the previous candlestick, the star position
candlestick gaps up or down and appears isolated from previous price action. The two
candlesticks can be any combination of white and black. Doji,hammers, shooting stars and
spinning tops have small real bodies, and can form in the star position. Later we will examine
2- and 3-candlestick patterns that utilize the star position.
Harami Position
A candlestick that forms within the real body of the previous candlestick is in Harami
position. Harami means pregnant in Japanese and the second candlestick is nestled inside the
first. The first candlestick usually has a large real body and the second a smaller real body
than the first. The shadows (high/low) of the second candlestick do not have to be contained
within the first, though it's preferable if they are. Doji and spinning tops have small real
bodies, and can form in the harami position as well. Later we will examine candlestick
patterns that utilize the harami position.
Parabolic SAR
MACD
Bearish Harami
NBFC
Introduction
The Indian economy is currently recovering from the phase of sluggish growth and is
characterized by tangible progress towards fiscal consolidation and strong macro-economic
fundamentals. The Make in India campaign, governments initiative on bringing regulatory
reforms to facilitate ease of doing business in India, thrust towards growth of infrastructure
sector and financial inclusion will also demand NBFCs to shoulder the growth and
development phase, India is seemingly walking into.
NBFCs in India have been complimenting the banks in rendering financial services and over
the last few years have also been instrumental in bringing about financial inclusion in the
country. NBFCs have a critical role playing in infrastructure financing, micro lending, asset
backed lending, factoring and have a network which is far wider and granular than banks in
some cases. NBFCs accounted for 13% of the banks assets as on 31st March, 2013. While the
NBFCs assets as a percentage to GDP has increased from 8.4 per cent in 2006 to 12.5 per
cent in 2013, the NBFC sector has a share of 8% in the total financial sector assets of the
Indian economy.
challenging period for the NBFCs in 2013-14 but the economic conditions are expected to
improve in the coming financial year and so is the expectation of credit growth and
performance of NBFCs expected to improve. The operating environment has been
challenging for businesses putting constraints on credit recoveries for NBFCs as well.
However, in the financial year 13-14 the retail credit growth rate deteriorated due to a slow
economy and high interest rates unfavourably affecting demand for credit, mainly in the asset
financing segments. In the financial year 13-14 only 8% growth in retail credit was achieved
as compared to a growth of 19% in the previous year.
Prospects
The economy has been seeing early signs of improvement in various macroeconomic
parameters. These events are expected to give further boost to the economic growth of
the nation.
Factors like higher industrial growth and clearance of stalled projects are likely to
reduce cyclical pressure on major non-bank finance companies from the second half
of the next fiscal.
P/E
EPS
2015
Sector P/E
LTPT
NPA gross
21.31
Muthoot Finance
L&T Finance
Bajaj Holding
Reliance Capital
Sks Microfinance
IIFL Holding
Hdfc
Gruh finance
Dewan housing
Bajaj Finance
Shiram Transport
Sundaram Finance
M&M Finance
Shriram City
Cholamandalam
Powar finance
REC
IDFC
Q4 2014
Q4 2015
10.96
16.77
Q4 2014
Q4 2015
39.67
1.52
Q4 2014
Q4 2015
17.14
78.17
1665.72
Q4 2014
Q4 2015
12.11
30.06
640.55
1.57%
1.88%
357.35
3.18%
3.01%
180.94
165.19
-8.70
0.96
190.08
19700.00
72.94
41.76
Value
Q4 2014
Q4 2015
28.92
14.79
Q4 2014
Q4 2015
55.32
3.12
Q4 2014
Q4 2015
31.31
38.16
Q4 2014
Q4 2015
10.41
55.7
1186.91
Q4 2014
Q4 2015
14.61
27.45
584.93
Q4 2014
Q4 2015
40.05
5.68
Q4 2014
Q4 2015
9.26
42.83
Q4 2014
Q4 2015
25.4
179.23
Q4 2014
Q4 2015
15.27
54.42
Q4 2014
Q4 2015
35.37
41.03
Q4 2014
Q4 2015
16.62
14.73
313.88
-42.75
165
481
191.52
27.11
40.54
49.54
66.48 -5.4545455
1,723.10
1,862.43
8.09
458.52
Value
526.93
14.92
370.02
378.18
2.21
35.24
121.04 -0.1757469
74.06
110.16
141.17
912.66
Value
162.28
14.95
1159.64
316.73
7.38
310.7
Q4 2014
Q4 2015
18.92
85.52
1822.35
Q4 2014
Q4 2015
19.69
30.14
642.25
Q4 2014
Q4 2015
5.87
45.14
961.89
Q4 2014
Q4 2015
5.36
53.27
1135.13
Q4 2014
Q4 2015
13.92
10.58
225.45
333.4
7.31
147.44
149.6
1.47
90.73
Value
135.64
49.50
1,534.31
1,560.75
1.72
1,191.70
1,096.50
-7.99
213.04
Value
365.47
71.55
In the above Cholamandalam, Reliance capital, Dewan Housing, India Bulls, IDFC are the
value picks and L&T finance and SKS microfinance are Growth picks.
8.00%
7.00%
6.00%
L&T Finance
5.00%
4.00%
7.80%
8.50%
Reliance Capital
7.70%
3.00%
6.00%
IDFC
4.00%
2.00%
3.00%
3.00%
Sks Microfinance
1.00%
Cholamandalam
0.00%
Dewan housing
India Bulls Housing
13,77,854.40
12,00,000.00
10,00,000.00
9,15,370.75
8,00,000.00
6,00,000.00
4,00,000.00
2,00,000.00
0.00
4,83,516.80
2,88,585.00
5,64,135.00
3,66,157.55
1,93,376.80
Gain in Percentage
17.66%
15.26%
14.10%
12.21%
6.45%
5.69%
3.75%
10
8
6
4
NBFC Fund
09-Jul-15
08-Jul-15
07-Jul-15
06-Jul-15
05-Jul-15
04-Jul-15
03-Jul-15
02-Jul-15
01-Jul-15
30-Jun-15
29-Jun-15
28-Jun-15
27-Jun-15
26-Jun-15
25-Jun-15
24-Jun-15
23-Jun-15
22-Jun-15
21-Jun-15
20-Jun-15
19-Jun-15
18-Jun-15
17-Jun-15
16-Jun-15
15-Jun-15
14-Jun-15
13-Jun-15
-2
12-Jun-15
Sensex
As you can see that the returns of NBFC fund is more than that of the Benchmark Sensex. The returns
given by the NBFC sector is 10.2% where as the return given by the Sensex is 4.8%.
Technical Analysis
SMA (Simple Moving Average)
MACD
Bearish Engulfing
Bollinger Bands
Parabolic SAR
It allows you to invest in a portfolio targeted at large-cap stocks which are the
preferred picks in their respective sectors.
Scheme Name
MET Large Cap Fund
Particulars
Scheme
Benchmark*
S&P BSE Sensex
Since Inception
July 15th, 2015
Current Value of
Investment of
Rs.
Absolute Returns (%)
10,00,000
7.32%
10,73,200.00
7.18%
10,71,800.00
6.93%
10,69,300.00
*S&P BSE 100
Portfolio as on July 15, 2015
Company Name
Infrastructure Companies
EngineersInd
Larsen
NBCC
Siemens
% to
NAV
8.85%
3.27%
2.60%
2.45%
0.53%
Automobile Companies
Hero Motocorp
Ashok Leyland
2.02%
1.38%
0.63%
Pharma Companies
Aurobindo Pharma
Piramal Enterprises
Wockhardt
Strides Acrolab
Glenmark
10.47%
1.00%
2.17%
0.78%
4.60%
1.07%
Company Name
Banking Companies
Karur Vysya
Yes Bank
ICICI Bank
City Union Bank
IndusInd Bank
% to
NAV
5.82%
2.12%
1.66%
1.02%
0.49%
0.54%
NBFC Companies
L&T Finance
Reliance Capital
IDFC
Sks Microfinance
Cholamandalam
Dewan housing
India Bulls Housing
4.20%
0.87%
0.84%
0.76%
0.68%
0.43%
0.32%
0.30%
Biocon
0.86%
10.40%
1.34%
1.60%
0.88%
Essar Oil
HPCL
BPCL
Gujarat Pipavav
Adani Port
1.51%
1.14%
1.01%
1.46%
1.45%
4.79%
0.82%
1.62%
0.59%
0.55%
0.60%
0.61%
4.71%
0.30%
0.30%
0.83%
0.58%
0.26%
0.53%
1.04%
0.62%
0.24%
8.70%
2.61%
0.87%
0.97%
4.26%
10.08%
1.07%
2.08%
2.52%
3.42%
0.98%
FMCG
ITC
HUL
Colgate Palmolive
Jyothi Laboratories
GlaxoSmithKline Consumer
Healthcare
Tata Global Beverage
Relaxo Footwear
Britannia Industries
Bajaj Corp
8.61%
1.39%
0.74%
0.50%
1.05%
0.48%
Retail
Bata India
Arvind
Raymond
Trent
V-mart
1.63%
0.45%
0.47%
0.31%
0.19%
0.21%
IT Companies
Persistent Systems
Cyient
HCL Tech
Infosys
Wipro
6.14%
0.80%
0.99%
2.42%
0.46%
1.48%
3.94%
0.55%
0.55%
0.58%
1.14%
1.12%
Telecommunication
Bharti Airtel
Idea Cellular
Tata Communication
Paints
Kansai Nerolac paints
Akzo Nobel India
5.24%
2.33%
1.97%
0.94%
4.41%
0.45%
3.96%
1.01%
1.18%
1.06%
1.19%
7.00%
6.00%
5.00%
4.00%
MET FUND
3.00%
2.00%
1.00%
15-Jul-15
13-Jul-15
11-Jul-15
09-Jul-15
07-Jul-15
05-Jul-15
03-Jul-15
01-Jul-15
29-Jun-15
27-Jun-15
25-Jun-15
23-Jun-15
21-Jun-15
19-Jun-15
17-Jun-15
15-Jun-15
13-Jun-15
-1.00%
11-Jun-15
0.00%
MET FUND
3.00%
2.00%
1.00%
0.00%
11-Jun-15 18-Jun-15 25-Jun-15
-1.00%
02-Jul-15
09-Jul-15
Conclusion
Banking companies
ICICI Bank, Yes Bank, Karur Vysya, City Union Bank are fundamentally strong as their
NIM and Casa ratio is increasing and P/E is less which is good from investors point of view.
IndusInd Banks NIM has decreased and P/E is more than Sector P/E but it is a growth pick
and this bank has given good returns in the past.
Technically ICICI is in sideways, Yes Bank is in downtrend, Karur Vysya, City Union Bank,
and IndusInd bank are in uptrend.
NBFC companies
Reliance Capital, India Bulls Housing Finance, Dewan Housing, Cholamandalam investment
and finance, IDFC, L&T Finance Holding, SKS Microfinance are fundamentally strong.
Technically Reliance Capital is in downtrend, Dewan Housing and IDFC are in sideways,
and India Bulls Housing Finance, Cholamandalam investment and finance, L&T Finance
Holding, SKS Microfinance are in uptrend.
WEBLIOGRAPHY
www.india-financing.com/overview-of-the-indian-nbfc-sector.html
www.equitymaster.com/detail.asp?date=9/13/2003&story=5&title=Identifying-an-FIstock-Dos-and-Donts
http://stockshastra.moneyworks4me.com/economic-outlook/indian-banking-industryindian-banks-structure-business-model/
www.equitymaster.com/research-it/sector-info/bank/Banking-Sector-AnalysisReport.asp
http://www.india-financing.com/images/Articles/NBFC_Sector_Report_2014.pdf
www.equitymaster.com/research-it/sector-info/finance/Investment-Finance-SectorAnalysis-Report.asp
http://www.moneycontrol.com/india/stockpricequote/financeinvestments/ltfinanceholdings/LFH
http://www.moneycontrol.com/india/stockpricequote/financeinvestments/cholamandalam
http://www.moneycontrol.com/india/stockpricequote/finance-investments/dewanhousing
www.investopedia.com/terms/h/hedge.asp
http://www.yourarticlelibrary.com/banking/indian-banking-system-structure-andother-details-with-diagrams/23495/
http://www.ibef.org/industry/financial-services-india/showcase